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Peak Oil Demand: The Beginning and End of Oil

It is demand for oil that may peak as governments adapt to the problems of global warming, security of supply and an amplitude of market volatility that could bring economic ruin to nations and then the world. Oil-demand may be reduced preemptively to the production peak (peak oil) through more efficient vehicle technologies and finding alternative energy sources. Ultimately electricity is seen as the best "supply vector" for delivering energy to users. Probably it is a game of "tag" between reducing demand and falling supply; whichever comes first will win-out.

Peak Oil is the global term used to describe an eventuality when world oil production reaches a maximum, and then relentlessly falls. Such "peak" models are based on an inexorable rise in demand for oil, against an infrastructural lack by which to meet that demand (i.e. you can't pump out more). Supply-demand gaps are to be expected en route but once the peak is reached, the shortfall in supply is catastrophic. As a rider to this, it should be noted that there is no such thing really as "global peak oil" since different fields, under the control of various regimes will peak at different times, thus shifting the emphasis of economic and political control across the globe. Those without oil will become weak and those with plenty of it will become strong - or targets for other nations who want to grab their oil.

Now, the assumption of relentless demand has been called into question in a new report entitled "The Beginning and End of Oil" by Peter Hughes, who is a director of Arthur D. Little's global energy and utilities practice. The main issues surrounding oil, climate change, security of supply, and an amplitude of market volatility that could bring economic ruin to nations and then the world, are lucidly clear. Rather than simply waiting in a spirit of foregone conclusion for these calamities to unfold, it is likely that governments will be forced to act preemptively to anticipate and provide alternatives, which will curb demand for oil.

It is a global energy-mix that is to be contrived, rather than a single solution, which there is not. The recent hike to $150 and then a crash to $30 for a barrel of oil hand in hand with the credit crunch, makes it clear to most governments that deliberately reducing our demand on oil is a policy imperative. Of all the energy-resources, oil is especially vulnerable since more than half of the world's 30 billion barrel annual count goes to fuel transportation. The absence of alternatives to oil-based fuels has cemented the outstanding stature of oil as literally empowering the engines of progress.

However, a chain of policy initiatives spanning the globe is encouraging more energy-efficient technologies throughout the transportation sector - whether on the road or in the air. High efficiency diesel engines and hybrid and regenerative breaking systems can extract more than twice the tank to wheels miles that conventional spark-ignition/petrol engines can. Meanwhile there are aircraft fuselage designs that promise savings of 30% on fuel costs, and high-temperature aircraft engines that recover energy more efficiently from fuel, so long as sufficient quantities of metals such as hafnium can be recovered to bring them to a proficient reality.

Peter Hughes, a director of Arthur D. Little's global energy and utilities practice, said:"As the number of new policy measures implemented to reduce reliance on hydrocarbons for transportation reaches critical mass over the next 10 years, the world could see downward pressure on demand for oil and oil-products materialize much sooner than the [oil] industry would currently concede. Depending upon how quickly the transportation sector begins its migration away from oil, we could find ourselves at a tipping point in which demand for oil peaks much earlier than the industry currently anticipates, before going into long-term decline."

In the wavering scales of the energy-balance, (the report says that) oil and gas companies should reconsider the sustainability of their business models and accelerate their moves to spread into other sectors of the "energy value chain" (not a phrase I would use but is "management speak"). A greatly increased contribution from coal, natural gas, nuclear power and "other alternatives to hydrocarbons" (whatever they may prove to be) is to be expected.

The report concludes that electricity is likely to be the main supply vector for delivering energy to customers which will "create demand for multiple sources of clean power as well as the infrastructure to deliver it."

All in all, it is better to close the stable door before the horse bolts, rather than after. We will need to make the kind of changes outlined eventually, so let's begin making them now, while we still have enough conventional energy in hand to establish new paths. Probably we are involved in a game of "tag" between reducing demand and falling supply. Whichever comes first will win-out.

By. Professor Chris Rhodes

Professor Chris Rhodes is a writer and researcher. He studied chemistry at Sussex University, earning both a B.Sc and a Doctoral degree (D.Phil.); rising to become the youngest professor of physical chemistry in the U.K. at the age of 34. A prolific author, Chris has published more than 400 research and popular science articles (some in national newspapers: The Independent and The Daily Telegraph) He has recently published his first novel, "University Shambles" was published in April 2009 (Melrose Books). http://universityshambles.com

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Interesting arguement, but it does assume that the the overall energy path remains 'business as usual', which in itself is debatable. I am much more pessimistic myself on the 'peak demand' view of oil in developed nations on the basis of global manufacturing relocation to be nearer the end consumer, of which the consumer accounts for 70% of GDP in the US today. My own fear is that efficiency gains will be out weighed by higher energy requirements of manufacturing in the years ahead.

Anonymous on September 24 2010 said:

In brilliant lectures that I am going to give here in Sweden and in Paris, one of my key points is that OPEC is now in charge. You mention that after the oil run-up to 147 dollars, it fell to 30 - or actually about 30. What happened was that OPEC had a meeting and cut output by about 2 million barrels per day. That changed things immediately - and it may have happened that the reduction in output was greater than 2 million. I've heard a figure of 4 million mentioned.In the beginning of this century the OPEC people were trying to get a price of 28 dollars for a barrel of oil. The oil price escalation began at somewhat less than that. The next escalation will begin at $75/b. That is not good news, although it might be possible that the OPEC directorate will recognize that they have nothing to gain by bankrupting the oil importing countries.What's the solution? It's for government to get smart instead of dumb, and do what has to be done.

Anonymous on September 24 2010 said:

A new book by Robert Hirsch, the author of Peak Oil, former Energy Advisor to the President, and Oil and Energy Expert highlights the topics you're bringing up here in detail. I get the sense that you feel that an 'all of the above' approach is the only one that will see us through this crisis. The Impending World Energy Mess makes the same argument.

Anonymous on September 24 2010 said:

We have most probably already seen "peak oil". If not, then we are very close to it at 87 MMBBL/day. Demand for crude is not going to wane because we switch to electricity. What will be used to generate electricity?.. and there is no apparent way to power the trucking industry without oil. So far as I have read, China, Asia, and the rest of the world are not too worried about the environment. They just want the U.S. to worry about it, while they streak aheadwith the dirty oil powering their growth.When I see the world produce 89 MMBBL/day again for any protracted time, I will cede that "peak oil" has not yet been reached. But that will not change the fact that demand is not about to wither away because of what "governments" do. The world continues to grow without regard to supply.

Anonymous on September 25 2010 said:

Its all very well talking about fuel efficient technologies in the Western economies, but if China for example is about to out-consume the West in terms of oil, can you see the Chinese going really strongkly for fuel efficient technologies, given even their basic attitufes towards pollution and waste? As I said in another comment, inventing all these marvelous efficiency technologies is all very well, but national attitudes plus power politics plus demographic explosions will tend to nullify them. Plus the global addiction to plastic.That's the reality.